A. Copyright Notice
This patent document contains material that is subject to copyright protection. The copyright owner has no objection to a statutory fair use of this material, as it appears in the files of the files or records of the U.S. Patent and Trademark Office, but otherwise reserves all copyright rights whatsoever.
B. Technical Field of the Invention
The present invention is in the field of digital electrical machines and methods for making and using the same, data structures, necessary intermediates, and products produced thereby. More particularly, the present invention is directed to a digital electrical apparatus and method for data processing and data management having particular utility in the field of employee benefits, insurance, and compensation, especially in a business or financial transaction data processing system. Still more particularly, the present invention pertains to automated or partially automated (as by machine) activities in financial, business practice, management, or cost/price determination. Even more particularly, the present invention pertains to a machine comprising a digital electrical computer having a processor programmed for electrically processing input data into output data, the computer electrically connected to an input device and to an output device, for illustrating a replacement of a benefit plan.
The genesis of this invention originates in what the inventor believes is a need to provide fair and equal compensation to the global work force. And given the morass of national laws, it has been a challenge to provide equivalent benefits to employees, executives, and self-employed individuals located anywhere in the world. Typically, U.S. multi-national employers (MNEs) will offer their domestic employees both xe2x80x9cqualifiedxe2x80x9d and xe2x80x9cnon-qualifiedxe2x80x9d benefits. Qualified benefits usually include one or more retirement plans, designed as either defined benefit plans (such as pensions) or defined contribution plans (such as the 401 (k)). Non-qualified plans are generally available only to executives and include both defined benefit plans, such as Supplemental Executive Retirement Plans (SERPs), defined contribution plans, such as Deferred Compensation Plans, incentive plans, such as Incentive Stock Option Grants, and risk-transfer plans, such as Executive Life Insurance Plans (ELIPS).
For those employees outside the U.S., whether they are U.S. citizens on a foreign assignment (expatriates), foreign nationals on assignment in the U.S. (inpatriates), third-country nationals (TCNs), or foreign nationals in their home country (locals), cannot be offered the same benefit plans for economic and tax reasons. Therefore, an inequity in benefits is created between the international employees, both U.S. and foreign, and their U.S.-based peers. Often, the disgruntled international employees openly express their discontent and the MNE""s human resource (HR) department is under pressure to provide an equivalent benefit. Prior to this invention, there was no efficient uniform means for providing equivalent benefits, and most MNEs would ignore the demands for equivalent benefits or increase cash compensation as a partial offset.
Many MNEs do not allow their U.S. expatriates to participate in the employer""s 401 (k) plan, because the deferral of income is recognized as income in the majority of foreign jurisdictions. This means that the employee is taxed on income not received, and the MNE will usually gross up the employees"" compensation to cover the additional foreign income tax, under the MNE""s tax equalization program. Those MNEs that do allow their employees to participate in the 401 (k) retirement plan incur added globalization costs.
In addition, when foreign national employees are assigned to work in countries other than their home country (TCNs) the home country pensions are frozen and the employee may or may not be eligible to participate in the pension plans of the host country where assigned. Consequently, the TCN employee may retire with a pension that is less than the pension of a colleague who never left the home country. Prior to this invention, there was not uniform means for providing xe2x80x9cpension gapxe2x80x9d funding created by these situations.
The cost of maintaining a global workforce is significant. Generally, an employee in the U.S. with an annual salary of $100,000 may cost the MNE over $500,000 annually while on an overseas assignment, because of incentives, allowances and tax gross-ups that are usually paid. Local nationals and TCNs may be somewhat less expensive, based on their negotiated compensation packages. To alleviate the cost of globalization, the international HR departments are continually pressured to find ways to cut cost. At the same time, the international employees are trying to ensure that cost cutting does not affect their pocketbooks. Prior to this invention, there was no uniform means for reducing employee cost without reducing the employee""s compensation package.
The time required to administer an international workforce is also excessive. It is estimated through surveys, conducted by Organization Resource Counselors, Inc. in New York, that each international employee demands over 60 hours of administrative time per year. This time is spent administering compensation and benefit issues for the various jurisdictions in which the MNE may be operating. If an MNE is operating in 200 countries globally, there are 200 different sets of labor and tax laws that the international HR department has to consider when making even the smallest change to the compensation and benefits program. The implementation of a global plan, such as an incentive stock option program, presents significant administrative time requirements and expense to sort the tax and legal impact associated with its implementation. Prior to this invention, there was not a single-source, cross-border solution for implementing benefit plans.
Recruitment for foreign assignments is also difficult. Historically, employees have been financially enticed to accept a foreign assignment. In recent history, career development requires international experience, and the HR departments would like to change the employee""s motivation for accepting an assignment from a financial incentive to a career incentive. However, due to downsizing and mergers, most employees are not convinced that career enhancement opportunities actually result from overseas assignments. In many cases, the international employee has had no career position to return to upon repatriation. Therefore, it is difficult to gain employee acceptance of any cost cutting program in favor of career enhancement. Today, employees are focused on xe2x80x9cwhat""s in it for me.xe2x80x9d Prior to this invention, there was no uniform means for keeping the employee xe2x80x9cwhole,xe2x80x9d while reducing the cost to the MNE.
To further complicate the situation, MNEs have to continually deal with changing tax laws in the U.S., as well as the other jurisdictions in which they may do business. Compliance with changing tax laws and host country social programs is extremely challenging. Consequently, many MNEs find themselves out of compliance in one or more jurisdictions. Prior to this invention, there was no uniform means for providing benefits in a stable tax environment that would be applicable across jurisdictional borders.
Currently, only a few MNEs have addressed these issues to any great extent. In doing so, there have been programs designed for each specific type of international employee and each host country in which they work. Consequently, some MNEs may have as many a 100 different benefit plans for their global workforce. The administrative burden is overwhelming. Prior to this invention, there was no uniform means for providing a single-source benefit program that could provide multi-jurisdictional benefits.
The intent of this invention is to provide equivalent benefits. It is important to understand that equivalent benefits means xe2x80x9cequitablexe2x80x9d benefits, but does not have to be the xe2x80x9csamexe2x80x9d benefits. To further explain, foreign employees do not need to participate in a U.S. 401 (k) plan, as long as the distribution from their replacement plan provides the same economic benefit as their U.S. peers.
To design a multi-jurisdictional replacement benefit plan is largely dependent on the tax laws of the host jurisdiction within which the benefitted employee is the taxed entity. Generally, foreign jurisdictions are either common law or civil law entities. Civil law is based on the court""s interpretation of the law as written, whereas each court decision adds to the body of law in a common law system. In either system, individual taxable income is based on any one or more of the following factors:
1. Tax residency
2. Remittance of income into the country
3. Economic benefit enjoyed by the individual
4. Benefits-in-kind
5. Constructive receipt of the income
6. Income effectively connected with the country (foreign sourcing)
7. Income for services provided in the country.
Traditional devices, such as the 401 (k), deferred compensation and split-dollar executive life insurance plans, depend on special provisions in the U.S. tax law, which do not exist in foreign jurisdictions. Whereas an U.S. employee is allowed to elect to defer income not yet received without being in constructive receipt of the income, foreign jurisdictions consider the right to defer the same as constructive receipt and tax a deferral as income. Likewise, premiums paid on behalf of the employee for a split-dollar program (ELIP) may be taxed as benefits in kind. Although elective deferred compensation plans may be recognized by a few foreign jurisdictions, they generally require a more severe risk of forfeiture than acceptable in U.S. plans.
In addition, any items of compensation attached to the international employee become subject to foreign social insurance costs, which in most cases are materially significant. So, it is also important to attempt to reclassify any replacement benefits as non-income, as well as non-taxable.
In general, employee benefits can be classified in three waysxe2x80x94(1) risk-shifting plans, such as life, health and disability insurance, (2) accumulation plans, such as retirement plans, and (3) income deferral plans, such as non-qualified deferred compensation. Prior to this invention, compensation techniques, such as assignment-completion bonuses, were the predominant tax avoidance strategy employed by consultants. However, these bonuses are being viewed by foreign tax entities as compensation related to services provided in the host country and subject to tax through the application of both xe2x80x9cattributionxe2x80x9d and xe2x80x9clook-backxe2x80x9d rules. To provide replacement benefits utilizes risk-shifting and accumulation strategies, since the employee""s right to defer income is considered constructive receipt by most foreign jurisdictions and therefore, subject to tax.
The number of companies globalizing is increasing. Yet, the systems for supporting an international workforce are generally not adequate and sometimes obsolete. There is a limited number of consulting firms able to provide advice to MNEs and even less time to perform the myriad of functions necessary to support a global workforce. There are tremendous pressures to reduce costs, while at the same time improve performance. Consequently, the development and providing of state-of-the-art global benefits programs have been given a higher priority than ever before.
Meanwhile, MNEs are seeking the ability to provide equitable cross-border benefits to their global employees, and therefore, consultants are anxiously seeking providers who can supply global benefit solutions. Yet, to date, no one has dedicated the time and resources to developing the complex structures needed to provide global benefit plans. Prior to this invention, products and support programs for global benefit plans did not exist.
While there do exist a few providers who offer global health plans and group life, health and disability insurance plans, there are no providers of replacement benefits. In addition, there are considerable efforts being made to introduce defined contribution plans into Europe. Legislative changes are slow, especially in those countries where the social insurance programs are the strongest. Europe and the Far East are seeking an easy-to-implement defined contribution solution. Prior to this invention, there was no plan that could meet their needs.
Self-Employed Individuals and Consultants. The need for replacement benefits is not limited to employees and executives of multi-national corporations. In the global workplace, an increasing number of individuals are working as consultants or starting their own companies. Prior to this invention, there was no single source for these individuals to obtain the benefit plans they needed.
Individual Financial Services. Since replacement benefit plans are financial by nature, they affect every aspect of an individual""s financial affairs. Therefore, prior to the present invention, replacement benefits have not been integrated with other financial services that might be needed by the plan participant. The services that this is invention integrates include, but are not limited to, banking services, investment services, financial planning services, estate planning services, relocation services, and other such services.
Assumption of Benefit Liability. In accounting for benefit plans, the benefits owed to the plan participant""s are considered liabilities on the company""s balance sheet, and the annual increase in the benefit liability has a negative impact on the company""s earnings statement for the period in which the increase occurs. Consequently, the company""s benefit plans can have an unfavorable impact on the financial welfare of a company independent of sales, production and/or operations. Company management would like to be able to be able to completely out-source the benefit liabilities to relieve the company of the financial impact, as well as the administrative burden of providing services that are outside of the company""s business. Until this invention, there was no means for the assumption of the benefit liability.
A. Objects
Thus, an object of the invention for which a patent is sought is overcoming some or all of the drawbacks indicated herein by digital electrical computerized means or at least partially by machine.
It is a more particular object of the present invention to provide an apparatus and method for using a digital electrical computer system to process digital electrical signals to illustrate a replacement of a benefit plan.
It is a more particular object of the present invention to provide an apparatus and method for using a digital electrical computer system to process digital electrical signals to illustrate a benefit plan that is viable at one location but not viable at the replacement plan location.
It is a more particular object of the present invention to provide an apparatus and method for using a digital electrical computer system to process the input data into the output data, the output data corresponding to characteristics for a replacement of the benefit plan that is viable at the replacement plan location.
It is still another object of the present invention to provide an apparatus and method for using at least one, and preferably a plurality, of digital electrical computer systems to process digital electrical signals in support and implementation of the replacement plan, especially including computerized or computer-aided generation of all documentation involved in illustrating, supporting, and implementing the replacement plan.
It is yet another object of the present invention to provide an apparatus and method for using at least one, and preferably a plurality, of digital electrical computer systems to process digital electrical signals in an electronic community of related services (as discussed hereinafter) distinguished by virtue of the replacement plan or participation therein.
B. Summary
To meet these and other objects apparent from this document as a whole, the inventor herein has made a first innovation in the field of compensation and particularly in benefits that has created a need for a second innovation in the field of computer science, the latter being the subject of this patent application. The invention for which a patent is sought in overcoming some or all of the drawbacks indicated herein is an apparatus (machine), method of making the machine and products produced thereby, method of using the machine, article of manufacture, necessary intermediates including data structures, collectively referenced herein as the method. The method is implemented with a machine comprising a digital electrical computer having a processor programmed for electrically processing input data into output data, the computer electrically connected to an input device and to an output device, for illustrating a replacement of a benefit plan. Preferably, the method is carried out including the steps of: entering information defining a benefit plan that is viable at one location but not viable at the location of the replacement plan, to convert the information into a portion of the input data that is electrically conveyed to the digital electrical computer for processing; engaging the digital electrical computer for the processing of the input data into the output data, the output data corresponding to characteristics for a replacement of the benefit plan that is viable at the replacement plan""s location; and generating an illustration of the replacement at the output device. The foregoing can be carried out further including the step of computer-assisted administering of the replacement in accordance with the illustration and/or further including the step of computer-assisted accounting of payments for the replacement in accordance with the administrating and/or further including the step of computer-assisted trust accounting for the replacement in accordance with the administrating.
In any of the foregoing, the step of computer-assisted trust accounting for the replacement in accordance with the administrating can include the step of computer-assisted trust accounting for an unfunded deferred tax plan trust, and/or can include the step of computer-assisted trust accounting for a funded current tax immediate-vesting plan trust, and/or can include the step of computer-assisted trust accounting for a funded deferred tax deferred-vesting plan trust, and/or can include the step of computer-assisted trust accounting for a funded 83(b) election, deferred tax deferred-vesting plan trust, and/or can include the step of computer-assisted trust accounting for a plurality of trusts for plans from at least two of the group: unfunded deferred tax plan; funded current tax immediate-vesting; funded 83(b) election, deferred tax deferred-vesting plan trust; and funded deferred tax deferred-vesting.
Similarly, any variant of the foregoing can further include the step of computer-assisted policy administration for funding for the replacement in accordance with the trust accounting, and/or computer-assisted calculating of net asset accumulation of the funding for the replacement for reporting and in accordance with the policy administration, and/or computer-assisted reinsurance administration for the policy in accordance with the policy administration, and/or computer-assisted reinsurance administration for the policy in accordance with the policy administration.
Likewise, in any variation of the foregoing, the step of engaging the digital electrical computer for the processing of the input data into the output data, the output data corresponding to characteristics for a replacement for the benefit plan that is viable at the replacement plan""s location, can include engaging the digital electrical computer for the processing of the input data into the output data, the output data corresponding to characteristics for a cost-reduction-profit sharing replacement for the benefit plan, corresponding to characteristics for a synthetic defined contribution plan as the replacement for the benefit plan, corresponding to characteristics for a stock option substitute as the replacement for the benefit plan, corresponding to characteristics for a pension gap supplement as the replacement for the benefit plan, corresponding to characteristics for a voluntary contribution as the replacement for the benefit plan, corresponding to characteristics for an employer supplemental contribution as the replacement for the benefit plan, corresponding to characteristics for a plan covering at least one of health, life, and disability as the replacement for the benefit plan, corresponding to characteristics for the replacement for a retirement plan as the benefit plan, corresponding to characteristics for the replacement for a deferred compensation plan as the benefit plan, characteristics for the replacement for an incentive plan as the benefit plan, and/or characteristics for the replacement for a retirement plan as the benefit plan.
Moreover, in the foregoing variants, the step of computer-assisted trust accounting for the replacement in accordance with the administrating can include accounting for a trust investment, accounting for a loan secured by non-trust funds, and/or accounting for interim distributions of trust funds.
Additionally, any such variants can be carried out as further including providing Internet-based computerized banking services in response to data communicated over the Internet to a banking service computer, the data confirming an identity for an employee receiving the replacement.
It is especially preferred that any of the foregoing be carried out by further including providing Internet-based computerized investment service in response to data communicated over the Internet to an investment service computer, the data confirming an identity for an employee receiving the replacement, further including providing Internet-based computerized financial planning service in response to data communicated over the Internet to a financial planning service computer, the data confirming an identity for an employee receiving the replacement, further including providing Internet-based computerized relocation service in response to data communicated over the Internet to a relocation service computer, the data confirming an identity for an employee receiving the replacement, further including providing Internet-based computerized estate planning service in response to data communicated over the Internet to an estate planning service computer, the data confirming an identity for an employee receiving the replacement.